Wednesday, June 30, 2021

“Flipped Switches” in Later Life


Today is Day #35 of a 35-day sequence of tweets about the content of my book, Flipping a Switch. The words “flipped switch” are a metaphor for transitions that people face in the last third of life and the book describes 35 of them. Examples include spending down savings, taking required minimum distributions, and keeping busy.


The target reader for Flipping a Switch is a wide swath of Americans: older adults in the last third of their life and younger adults who are planning ahead and/or assisting older family members. Specifically, the book can help Gen Xers and millennials better understand their parents’ financial and lifestyle transitions and changing mindsets.


There are 15 financial, 5 social, and 15 lifestyle-related “flipped switches” described in the book and the #35DaysofFlippedSwitches tweets described each one, along with a suggested action step to address that issue.


Below is a table that summarizes the 35 “flipped switches” in my book and key action steps for each life transition:


Description of “Flipped Switch”

Key Action Step


1.       If You Don’t Spend Your Money, Someone Else Will

Automate savings withdrawals (e.g., annuities, managed payout mutual funds, bond and CD laddering, automatic withdrawals).


2.       Deciding When You Have Enough

Try some online savings calculators to determine how much money you need to save to live comfortably.


3.       Creating a “Paycheck”

Consider purchasing low-expense annuities for guaranteed income and as a longevity hedge.


4.       RMDs: The Mandatory Flipped Switch

Consult with a CPA® or financial advisor if you need help taking RMDs or investing or gifting money that is withdrawn.


5.       Later Life Investing

Beware of “free meal seminars” that target older adults and have been linked to fraudulent or inappropriate investments.


6.       Adjusting to Changes in Income and Expenses

Consider working 1 to 2 years longer if you are a “late saver” to save more money and earn a higher Social Security benefit.


7.       Taxes: It’s Not What You Earn, But What You Keep

Consult with a CPA® or financial advisor the first tax season after leaving work to get a professionally prepared template tax return.


8.       Becoming a Social Security Beneficiary

Beware of the earnings limit ($18,960 in 2021) and consider your employment plans before applying for Social Security.


9.       Health Care Transitions

Take care of yourself (e.g., dietary changes) to stave off chronic diseases and maintain quality of life so aging is not painful and costly.


10.    Transitioning to Medicare

Review the annually updated publication Medicare and You and reach out to your local SHIP office for Medigap policy assistance.


11.    Setting New Financial Goals

Automate spending and gifting goals so withdrawing money from investments does not feel like a “loss.”


12.    You Can’t Take It With You: Philanthropy/Estate Plans

Investigate a charity’s administrative expense ratio and make gifts to charities that spend the bulk of their funds on their charitable mission.


13.    Financial Organization and Simplification

Make a list of digital assets with a list of user names, passwords, PINs, and other details related to your digital life.


14.    Becoming Fraud Bait

Recognize “red flag language” (e.g., pressure to act immediately and tell nobody and requests to “verify” your account and delete/hang up.


15.    Achieving Financial Peace of Mind

Run a Monte Carlo analysis or consult a financial advisor to see if you’ve saved enough money to not have to worry about money.


16.    Answering the “What Do You Do?” Question

Introduce yourself to others with a new business card that says what you want it to say about your current pursuits.


17.    Changed Relationships With Family and Friends

Define your boundaries and have honest discussions with family members about your lifestyle and care-giving preferences.


18.    Becoming the Family Storyteller

Impart values (e.g., hard work and honesty) into family stories so they have a greater impact beyond simply telling the story itself.


19.    Successful Solo Aging

Consider a continuing care retirement community (CCRC) to receive a continuum of lifetime care as you get older.


20.    Finding Meaning and Purpose with Others

Give yourself time to develop a new post-career lifestyle. For many people, it is not “on-off,” but a series of gradual transitions.


21.    FINDing Fulfillment After Full-Time Work

Don’t disappear from the workforce for long if you get bored after a primary career. Within two years, you are likely to be deemed “rusty.”


22.    Downsizing and Divesting

Sort possessions into two piles- keep and discard- when you are downsizing. Take discarded items to thrift shops to “recycle” them.


23.    Get Help When Needed

Place checkbooks, financial records, and valuables in a safe, locked file cabinet or other secure place when household workers are present.


24.    Disengaging the Past and Engaging the Future

Mentor others to carry on your work. Talk them through process steps, train them, and share document files.


25.    A New Definition of Busy

Identify one or more high-priority “big rocks”; i.e., activities that take a big chunk of time. Doing this will provide daily time structure.


26.    Increased Interest in Accessibility

“Layer” lighting to reduce safety risks (e.g., falls) by combining ambient lighting, task lighting, and accent lighting.


27.    Should I Stay (Put) or Should I Go?

Do pre-move research. Visit potential relocation sites during different seasons and follow their local news online via social media.


28.    No More Excuses

Develop a new “go to” response to replace “Sorry, I have to work” and strategies to filter requests to do things.


29.    Pleasing Yourself Instead of Others

Make a list of things that you do to please others. Next, consider whether those activities really have an element of choice.


30.    Seeking Happiness in Later life

Focus on PERMA: Positive emotions, Engagement in activities, Relationships, Meaning, and Achievement.


31.    Green Bananas, ROLE Calculations, and Lasts

Think about upcoming major purchases and whether items you plan to buy can be expected to last the remainder of your lifetime.


32.    Self-Regulation and Time-Shifting

Anticipate possible losses in visual, cognitive, and/or motor skills as you get older and adapt personal behaviors accordingly.


33.    Invincible to Vulnerable

Do all that you can to avoid injury (e.g., falls) and push back the start of age-related chronic diseases such as diabetes.


34.    Handling “Wildcard” Events (Widowhood, Gray Divorce, and Diminished Capacity)

Provide financial advisors and institutions with the name of a trusted person to contact if unusual account activity or fraud is suspected.


35.    Planning a Good Ending

Do what you need to do to plan for an uncertain future (e.g., prepare or update legal documents and communicate final wishes to others).



For more information about the content of Flipping a Switch, check out this webinar that I recently presented.


Thursday, June 24, 2021

Post-Pandemic Financial Recovery Steps

It is safe to say that COVID-19 impacted the finances of every American in one or more ways. It was a tsunami that swept up everyone. Economic impacts were far from even, however.

People with secure jobs or pensions and decreased expenses and spending opportunities saved more and/or reduced debt. Others who lost income struggled (and are still struggling)  to pay bills and buy food. Some industries (e.g., e-commerce) did well while others (“face-to-face” businesses and travel) did not.

Now that more than half of the country’s population has been vaccinated and job openings are increasing, there is increasing attention being paid to post-pandemic financial recovery, both for the economy as a whole and for individuals and households. 

We have moved from a year of contraction (2020) to a year of economic rebound (2021). 

Below are eight recommended financial recovery steps that I heard recently at several webinars:


Replenish Emergency Savings- Set a final goal (e.g., three to six months’ of essential expenses) and identify interim progress points along the way (e.g., 25% and 50% of the final goal amount). Even if it takes months, even years, to replenish savings that kept you afloat during COVID-19, any small savings amounts are better than saving nothing.


Replenish Retirement Accounts- Consult with your employer HR department or plan custodian about steps to repay what you borrowed from a tax-deferred employer retirement savings plan such as a 401(k) or 403(b) plan. Like emergency fund replenishment, this will likely be done in a series of small steps.


Adapt to Changes in Your Mindset- Consider what the COVID-19 “experience” has taught you. For some people, their take-away is that “life is too short” and they want to move up a planned workplace exit date. For others, the pandemic might have exposed a lack of sufficient financial resources with a desire to work longer before retirement.


Assess Where You Are Now- Prepare a net worth statement (assets minus debts) to get a current “snapshot” of your finances. Your net worth will reflect both the status of your finances pre-pandemic and how your job/income and household expenses were affected. Update your net worth at least annually to track your financial recovery over time.


Build Savings Momentum- Consider doing a monthly or annual savings challenge to provide structure for the process of saving money for emergencies or financial goals. Another great way to build savings momentum is to automate savings through an employer retirement savings plan or automatic payroll deductions for a credit union savings account.


Plan Around Pent-Up Demand- Try to work around product shortages, shipping delays, and price increases that occur when items are in short supply. Examples: time-shift travel dates from peak to off-peak times and buy American made products. There is a lot of pent-up demand for travel, entertainment, dining out, and purchases that people put on hold.


Invest in Yourself- Consider taking courses and/or developing skills that will increase your value as an employee, a new hire, or an entrepreneur. Many people are starting “side hustles” to have another stream of income “just in case.”


Plan for Post-Moratorium Bill-Paying- Now is the time to plan to reintegrate expenses into your household budget that have been on hiatus for as long as 18 months. Examples include rent, utilities, mortgage payments, and student loan payments. This will probably require reductions in fixed and/or flexible expenses to work suspended payments back in.


Expect Some Transformational Changes- Consider the impact of transformational changes noted by Dr. James Hughes of Rutgers University at a recent meeting of the NJ Coalition for Financial Education: increased prevalence of remote work, a rise in e-commerce and decrease in brick and mortar retail stores, more “last mile” delivery stations (often at vacant malls), a decreasing blind acceptance of long commutes, and new office ecosystems with hybrid work models.



Wednesday, June 16, 2021

Getting Comfortable Spending Down Your Retirement Savings

 About this time last year, I was anxiously awaiting the release of my book, Flipping a Switch. The words “flipped switch” are a metaphor for transitions that people face in the last third of life and the book describes 35 of them. Examples include creating a retirement “paycheck,” taking required minimum distributions (RMDs) from tax-deferred savings plans, health care transitions, downsizing and simplifying, and keeping busy.


The genesis of the book (and its title) is another key transition for older adults who amassed wealth during their working years: feeling comfortable spending down savings. At a 2018 American Savings Education Council (ASEC) meeting, a presentation described a subset of retirees with a unique “problem”: they saved their whole life, are not comfortable spending down any savings, and their assets keep growing.


The speaker noted that “we need to teach people how to ‘flip a switch’ from saving to spending in later life.”


Recently, I attended a webinar by the Employee Benefit Research Institute (EBRI) that presented research about retiree lifestyles using data from a survey of  2,000 households age 62-75 with less than $1 million in assets. A key take-away is that retirement is not a uniform experience for older adults with varying demographic characteristics.


Five distinct lifestyles were identified: Struggling (18%), Just Getting By (12%), Average (28%), Comfortable (22%), and Affluent (19%). Another key finding was that most retirees are reluctant to spend a significant portion of their financial assets, often due to fear of the unknown (e.g., long-term care expenses) or running out of money.


While it may be hard to view “too much savings” as a problem, given that so many Americans are struggling as a result of COVID-19, there are downsides including working longer than needed, unnecessarily restricting spending to less than what one can afford, and unnecessarily restricting gifts to family members and qualified charities.


What to do? Below are six suggestions from the EBRI webinar and my book Flipping a Switch:


¨     Calculate Your Net Worth- Tally up household debts and subtract them from household assets. The result is your net worth. Many people have no idea how much they have in total (e.g., savings accounts, investments, and property value). It is hard to know what to spend in later life if you don’t know what you have.


¨     Step Outside Your Comfort Zone- Practice spending on “big ticket” items. Expect that this will feel very uncomfortable “going against the grain” of long-standing habits such as buying items at deep discounts, bragging about frugal purchases, flying coach when you can afford business/first class, and gifting modestly.


¨     Start a Spending Diary- Keep a record of decisions that you make and emotions that you feel when you spend money. It is not uncommon for people to feel a psychological loss when they see their account balances decrease after making withdrawals from their savings.


¨     Answer Some Hard Questions- Why did you amass a lot of money if you do not plan to spend it or gift it? What are you waiting for? Will your health get better with age? Do you already have enough money to be “financially independent” (i.e., not dependent on a job for income)? If you don’t spend your savings, who will?


¨     Automate Savings Withdrawals- Seek out financial products that facilitate “spending down.” If making cash withdrawals from savings makes you anxious, “set it and forget it.” Options include purchasing a fixed annuity that pays monthly income, managed payout mutual funds that provide monthly payments, bond and certificate of deposit (CD) “ladders” (i.e., varying maturity dates), and automatic withdrawal options for mutual funds.


¨     Get Help With Financial Decisions- Try some online calculators to reassure yourself that it is okay to spend down your money. For example, Monte Carlo calculators estimate the probability that savings will last a certain time period, typically 30 years. Another helpful resource is a certified financial planner®. If you have accumulated enough money to “flip a switch,” spend a little on a few hours of a professional advisor’s time.


Wednesday, June 9, 2021

The Value of Simple Process Steps


Last fall, I blogged about COVID-19 “bounces,” which I described as quick progress that would otherwise take some time. I used the analogy of a personal colonoscopy prep from which I dropped three pounds overnight.


This is similar to “financial bounces” that some Americans experienced during COVID-19. With reduced discretionary expenses and commuting costs, they had an opportunity for increased savings and reduced debt.


In this post, I describe another “Barbservation” from my personal life and its implications for financial education (and learning in general) and for encouraging positive behavior change.


Banish “Click Here” Messages and Connect Dots for People


The Challenge: I was recently selected to do a 10-minute pre-recorded Ignite presentation about charitable gifting for a virtual professional conference. Think: a recorded TED talk where slides advance automatically while you are speaking. When I asked the sponsors exactly how to prepare the video recording, I was sent a “visit this web site” e-mail with multiple “click here” links to screen shots from both Zoom and PowerPoint.


The Frustration: Needless to say, I felt overwhelmed. Why? I didn’t know how or where to start. What I really needed to complete the task at hand was a one-pager with a consecutive series of simple and succinct “how to” process steps starting from adding timings to my slides through saving the presentation as a mp4 video file. Instead, what I got was pages and pages of not-very useful information from multiple sources. Ugh!


The Determination: I almost decided to bail on the conference presentation but, to paraphrase the famous feminist slogan, “Nevertheless, I persisted.” It took me about six hours to review and crosswalk information from the multiple links, determine process steps in chronological order, add slide automations, get set up to record in Zoom, do a couple of practice takes, and record, save, and upload the final Ignite presentation.


The Results: If you are interested in tax-advantaged charitable gifting, you can watch the presentation here. If you are interested in recording your own TED-talk like video presentation, here are the process steps that would have made my own video recording process so much easier had they been available. I wrote them down in case I need them again and am happy to save you the frustration and learning curve that I experienced.


The Personal Finance Analogy: I could not help but think that some people must feel as frustrated about personal finance topics as I did about creating the Ignite presentation. They need to understand where and how to start to take action (e.g., invest in a mutual fund) and they need process steps. People who don’t know how to do something often feel stupid and don’t ask questions. They are not stupid. They simply haven’t learned how to do something yet!


Thursday, June 3, 2021

Women and Money: Closing the Gender Gap


No matter how much women prefer to lean, to be protected and supported, nor how much men prefer to have them do so, they must make the voyage of life alone, and for safety in an emergency they must know something of the laws of navigation.

                                                                                        Elizabeth Cady Stanton, 1892


These words were uttered by one of America’s most prominent women’s rights leaders almost 130 years ago.  Yet they are as appropriate in 2021 as they were during the late 19th century. Lack of financial savvy can put women (and men) at a substantial disadvantage in navigating both everyday financial decisions and occasional big ones.


Statistics tell us that it is only a matter of time before most (85% to 90%) women will be on their own financially.  Some will never marry, some will see their marriages end in divorce, and many will outlive their husbands.


Women have unique financial needs for the following reasons:

Ø  They live longer than men, on average, so their money has to last longer.

Ø  They earn less, on average, than men do.

Ø  They may have gaps in their employment history that will impact future retirement benefits.

Ø  They are impacted more severely than most men are by events like widowhood and divorce.

Ø  Some married risk becoming a “displaced homemaker” if the relationship ends (e.g., death and divorce).

Ø  Some women lack financial experience because they were taught “the man is supposed to handle the money.”


I learned in a recent Next Gen Personal Finance webinar that the un-controlled gender pay gap is 82% (i.e., on average, women earn 82 cents for every dollar men do) and the controlled pay gap (using data for men and women with the same job and qualifications) is 98%. There are smaller gender gaps for younger than older workers as gender gaps are “career progressive” and widen over time with job level and age. There are also smaller gaps where salaries are fixed (e.g., salary schedules and union contracts) via those where managers have some latitude.


While a 2% pay gap does not sound like a big deal, it is. Invested at a 7% return over a career, it can add up to almost $200,000! COVID-19 has exacerbated gender pay gaps as women were more likely to work in affected industries and to care for children schooling at home. As we have seen,  people’s work lives and home lives are intertwined. Almost 2 million women who  dropped out of the labor force since April 2020 have not yet returned.


A key take-away from the NGPF webinar was the need to teach women how to negotiate a starting salary and promote themselves. Otherwise, they will be forever behind because future percentage raises (e.g., 4%) will be based on a lower initial starting point. The following three tips were suggested for women to overcome pay gaps:


¨      Talk About Salaries and Careers- Discuss salaries, jobs, and money with co-workers in a casual, general way. As you get more comfortable talking about finances, consider asking peers, especially males, what they make, even if it makes you uncomfortable. Use the “under/over” method described below to “soften” the ask.


¨      Avoid Exact Dollar Amounts- Avoid sounding too direct and off-putting by asking people to divulge their exact salary amount. Instead, ask questions like “Do you make over $X?” or “Do you make under $Y?” A recent article described a young female worker who significantly increased her pay by using this approach.


¨      Practice Negotiation Skills- Develop and rehearse a “script” that focuses on your education, skills, and recent accomplishments. Emphasize how you can add value to an employer and help it to accomplish its mission. Role play negotiations with family or friends to practice making proposals and counter-proposals.


A more contemporary twist on Ms. Stanton’s quote is “If it is to be, it is up to me.”  Today is the first day of the rest of your financial life.  Make the most of it. Learn one new thing every day about personal finance and never consider your financial education finished.

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